Market under the surface is extremely weak

I have talked about the RSI divergence on the S&P for a while now, it doesn’t matter until it does. From where I am sitting it looks like it is about to catch up to us. In 1999 and 2007 the market after big moves up slowly started to have a rounded top heading into the end of the year. The same setup we have now both had RSI divergences 1999 which had been building for a few years in 2008 was only a few months. The breath in this market is terrible. The last few times we have found a bottom the breadth expanded on the move higher, we have not seen that happen and have been rejected at rsi and the downtrend line. The market leaders GOOGL AMZN the big earnings gaps are being faded AAPL was punished at earnings. The leaders look tired. Couple that with the VIX not making a move up indicating a lack of worry here, its concerning. In bull markets when one sector leads up higher and pulls back another steps in to take its place, with the lack of breadth here I am not seeing a sector emerging to take us higher yet. I am not interesting in adding new long positions until things improve for now I am sitting on my $SPXS and looking to add additional shorts next week. Be careful manage your risk and remember cash is a position.

About the author

Mike

With 8+ years of trading experience, I've learned to look at the investment world through a contrarian lens.
By going against the herd I position myself to achieve the largest possible returns in the quickest time frame with the least amount of risk.